2025 (12) TMI 1667 - AT - Central Excise

CENVAT credit for travel agents, club membership, real estate agent and outdoor catering services-mostly allowed; catering credit denied after 01.04.2011

CENVAT credit on Air Travel Agent, Rail Travel Agent and Club or Association services was held admissible as input services because they were used ... Wrongful availment of CENVAT Credit - Air Travel Agent Service - Rail Travel Agent Service - Real Estate Agent Service - Club or Association Service - Construction of Complex Service - Dredging Service - Outdoor Catering Service - Authorized Service Station Service - recovery with interest and penalty. Air Travel Agent Service - Rail Travel Agent Service - Club or Association Service - HELD THAT:- The services which has been used directly or indirectly in relation to the activities relating to manufacture and sale of the goods would be admissible. Commissioner (Appeals), Nashik has specifically held in favour of admissibility of the credit by relying upon various decisions of this Tribunal. Hence, there are no merits for denying Cenvat credit in respect of the said services. Real Estate Agent Service - HELD THAT:- The impugned order records that these services were used by the appellant in relation to storage of their final products, raw materials, packing materials in various godowns, depots and for providing accommodations to their employees or any third party who were responsible for planning and purchase of our raw materials & packing materials, canvassing sales, marketing promotions and various other business-related activities. Commissioner (Appeals) for denying the credit have held that these services are not fall under the category of manufacture of duty paying final products, there are no merits in the observations made by the Commissioner (Appeals) - there are no merits in denial of the Cenvat credit in respect of the Real Estate Agent Service. Outdoor Catering Services - HELD THAT:- Appellant do not challenge the denial of credit wrongly availed in respect of Outdoor Catering Services as the same fall within the exclusion category after 01.04.2011. Cenvat credit on Outdoor Catering services have been barred as the same has been inclined in the exclusion clause - Hon’ble Supreme Court in the case of M/s Toyota Kirloskar Motor Pvt. Ltd. [2021 (12) TMI 420 - SC ORDER] have held that 'the High Court has committed any error in denying the input tax credit and holding that such a service is excluded from input service.' Demand in respect of Outdoor Catering Services (Rs.43,25,974/-) along with interest is upheld. Penalty in respect of this amount is also upheld. Amount paid by the appellant against this demand are appropriated - Penalty imposed upon the appellant proportionate to the amount of demand upheld imposed under Rule 15 (1) of CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 is upheld - Demand in respect of Air Travel Agent Service, Rail Travel Agent Service, Club or Association Service and Real Estate Agent Service is set aside. Appeal allowed in part. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether CENVAT credit was admissible on Air Travel Agent Service, Rail Travel Agent Service, and Club or Association Service for the relevant period, or whether it was correctly denied for want of nexus with manufacture/clearance. (ii) Whether CENVAT credit was admissible on Real Estate Agent Service claimed to be used for storage facilities (depots/godowns) and accommodation connected with procurement, sales, marketing and other business-related activities, or whether it was correctly denied as not being 'critical' to manufacture. (iii) Whether CENVAT credit on Outdoor Catering Service was inadmissible post 01.04.2011 under the exclusion clause, and consequently whether demand, interest and penalty were sustainable to that extent. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Admissibility of credit on Air Travel Agent, Rail Travel Agent, and Club or Association Services Legal framework (as discussed by the Court): The Court proceeded on the definition of 'input service' under Rule 2(l) of the CENVAT Credit Rules, 2004, including the requirement that services be used by a manufacturer 'whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal.' The Court also noted the post-01.04.2011 narrowing of the definition by deletion of the phrase 'activities relating to business'. Interpretation and reasoning: The Court found that credit on these services, when used directly or indirectly in relation to activities connected with manufacture and sale of goods, is admissible. It accepted that a contrary view taken in the impugned order (that invoices did not show purpose/nexus) was not sustainable in light of the Court's assessment that these services were used in relation to manufacturing and allied business requirements. The Court relied on the fact that another appellate authority had specifically held such credits admissible by applying Tribunal decisions, and held that there was no merit in denying credit for these categories. Conclusions: The demand denying credit on Air Travel Agent Service, Rail Travel Agent Service, and Club or Association Service was set aside. Issue (ii): Admissibility of credit on Real Estate Agent Service Legal framework (as discussed by the Court): The Court extracted and applied the Rule 2(l) 'input service' definition emphasizing use 'directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal.' It further applied the principle (as stated in the judgment's reasoning) that even a 'loose nexus' between input service and manufacture/clearance can be sufficient for admissibility. Interpretation and reasoning: The Court noted that the impugned order itself recorded the asserted uses of Real Estate Agent Service: obtaining facilities related to storage of final products/raw materials/packing materials in godowns/depots, and arrangements linked with accommodation for persons engaged in procurement, sales, marketing promotions and other business-related activities. It rejected the approach that credit must be denied because the service was not shown to be 'critical' to manufacture or because manufacture would not 'adversely' suffer without it. Applying the statutory text as understood by the Court-covering services used 'directly or indirectly' in relation to manufacture and clearance-the Court held that the Commissioner (Appeals) erred in treating such services as falling outside the ambit merely by categorizing them as not part of 'manufacture of duty paying final products.' Conclusions: The demand denying credit on Real Estate Agent Service was set aside. Issue (iii): Inadmissibility of credit on Outdoor Catering Service post 01.04.2011; sustainability of demand, interest and penalty Legal framework (as discussed by the Court): The Court applied the post-01.04.2011 'input service' definition and its exclusion clause, under which credit is barred for specified services including outdoor catering when used primarily for personal use or consumption of employees. The Court treated the exclusion as determinative for the period involved. Interpretation and reasoning: The Court recorded that the appellant did not dispute denial for outdoor catering and had already deposited the credit sought to be denied along with interest. On merits, the Court held that Outdoor Catering Service fell within the exclusion category after 01.04.2011 and therefore credit was barred. The Court rejected the argument that a statutory requirement to provide canteen facility would itself make credit admissible, holding that 'statutory/mandatory requirement' was not made an eligibility criterion in the amended definition and that the exclusion clause governs. Conclusions: The Court upheld the demand for Outdoor Catering Service credit (to the quantified extent stated in the decision) along with interest, and upheld penalty proportionate to the demand sustained. Amounts already paid towards this sustained demand were ordered to be appropriated. Final outcome (as decided): The appeal was partly allowed: denial, interest and penalty were sustained only for Outdoor Catering Service; denial for Air Travel Agent, Rail Travel Agent, Club or Association, and Real Estate Agent Services was set aside.